Dr. Pralok Gupta

Assistant Professor

Centre for WTO Studies

New Delhi

GENERAL PRINCIPLES & GUIDELINES ON

SCHEDULING SERVICES COMMITMENTS

UNDER THE GATS

Overview

Scheduling of Commitments

What to Schedule in Commitments

How to Schedule Commitments

How to Record Commitments

Key Pointers for Scheduling Commitments

Overview of GATS

The General Agreement on Trade in Services (GATS),

a treaty of the WTO, entered into force in January

1995 as a result of the Uruguay Round negotiations

The treaty extended the multilateral trading system to

service sector, as the GATT provides such a system for

merchandise trade

The GATS contains two sorts of provisions

Part- I: General Obligations- MFN, Transparency,

Domestic Regulations etc.

Part- II: Specific Commitments- negotiated undertakings

particular to each GATS signatory, to be recorded in

national schedules

SCHEDULING OF COMMITMENTS

What is a Schedule?

A legal document containing commitments which are negotiatedundertakings particular to each GATS signatory

Article XX requires each Member to submit a schedule of specificcommitments but it does not prescribe the sector scope or level ofliberalization

A schedule contains the following information: a clear description of the sector or sub-sector committed

limitations to market access limitations to national treatment additional commitments other than market access and national treatment

The scheduling method used by the GATS is often called a "bottom-up"or "positive-list" approach since market access and national treatmentcommitments are undertaken only for sectors that have been included

Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

Sector or subsector Limitations on market access Limitations on national treatment Additional

commitments

I. HORIZONTAL COMMITMENTS

SECTORS

INCLUDED IN THIS

SCHEDULE

II. SECTOR-SPECIFIC COMMITMENTS

[Insert specific commitments in the relevant service sector(s)/sub-sector(s) as appropriate]

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HOW TO DESCRIBE COMMITTED SECTORS

AND SUB-SECTORS?

The classification of sectors and sub-sectors should bebased on the Secretariat's Services Sectoral ClassificationList (MTN.GNS/W/120) Each sector contained in the Secretariat list identified by the

corresponding Central Product Classification (CPC) number

Where it is necessary to refine further a sectoralclassification, this should be done on the basis of the UNProvisional CPC or other internationally recognisedclassification (e.g. Financial Services Annex)

If a Member wishes to use its own sub-sectoralclassification or definitions, it should provide concordancewith the CPC If this is not possible, it should give a sufficiently detailed

definition to avoid any ambiguity as to the scope of thecommitment

CLASSIFICATION OF SERVICE SECTORS (MTN.GNS/W/120)

1. Business Services — Professional, computer and related, research and development, real estate, rental/leasing without operators and other business services;

2. Communication Services — Postal, courier, telecommunication, audiovisual and other communication services;

3. Construction and related Engineering Services — General construction for buildings and civil engineering, installation, assembly building completion and finishing work;

4. Distribution Services — Commission agents', wholesale trade and retailing services, franchising;

5. Educational Services — Primary, secondary, higher and adult education;

6. Environmental Services — Sewage, refuse disposal, sanitation and similar services;

7. Financial Services — Insurance, banking and other financial services;

8. Health-related and Social Services— Hospital, other human health and social services;

9. Tourism and Travel-related Services— Hotel and restaurants, travel agencies and tour operators, and tourist guides services;

10. Recreational, Cultural, and Sporting Services — Entertainment, news agency, libraries, archives, museums, sporting services;

11. Transport Services — Maritime, internal waterways, air, space, rail, road, pipeline and auxiliary transport services;

12. Other Services.

Antigua and Barbuda filed a complaint against US for violation of its commitments under GATS

Antigua‟s claim

Certain US laws, namely „Wire Act‟, „ Travel Act‟, „IllegalGambling Business Act‟ and certain State laws ofColorado, Louisiana etc. violated its GATS commitments

Restrictions imposed by above laws resulted in “totalprohibition” on cross border supply of gambling and bettingservices from Antigua

This violated US specific commitments on betting andgambling services

Case Study: US-Gambling Case

(DS285)

The relevant US Schedule read as follows

Sector or Sub sector Limitations on Market Access

10. Recreational, Cultural and

Sporting Services

A. Entertainment Services

(Including live band, theatre,

circuses)

B. News Agency Services

C. Libraries, Archives, Museums

and other cultural services

D. Other Recreational Services

(Except sporting)

(1) None

(2) None

(3) None

(4) Unbound, except as indicated in

horizontal sector

Same as above

Same as above

(1) None

(2) None

(3) The number of concessions available for

commercial operations in federal, state

and local facilities is limited

(4) Unbound, except as indicated in

horizontal sector

CPC Group 964 is broken down into following classes and sub-classes:

964 Sporting and other recreational services

9641 sporting services

96411 sports event promotion services

96412 sports event organization services

96413 sports facility operation services

96419 other sporting services

9649 other recreational services

96491 recreational park and beach services

96492 gambling and betting services

96499 other recreational services

CPC class that corresponds to “sporting services” (sub-class 9641) does notinclude gambling and betting services which falls in another sub class 9649

Taking into account all the above, AB concluded that entry in US schedule“Other recreational services (except sporting)” must be interpreted asexcluding services corresponding to CPC class 9641 “sporting services” andincluding services corresponding to CPC 9649, “other recreational services”including sub-class 96492, “gambling and betting services”

Exercise 1:

A Member wishes to make a commitment in the sub-sector of ''Accounting, auditing and bookkeepingservices''. How it should mention this sub-sector in itsSchedule of Commitments?

In the Classification List, this service falls within"Professional Services" which is a sub-sector under"Business Services". The Classification List alsocontains the relevant CPC number, 862.

In its Schedule, the Member could make the followingentry in the "Business Services"/"Professional Services"section: Accounting, auditing and bookkeepingservices (CPC 862)

Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

Sector or subsector Limitations on market access Limitations on national treatment Additional

commitments

I. HORIZONTAL COMMITMENTS

SECTORS INCLUDED IN

THIS SCHEDULE

II. SECTOR-SPECIFIC COMMITMENTS

[Insert specific commitments in the relevant service sector(s)/sub-sector(s) as appropriate]

01. Business Services

01.A. Professional Services

b) Accounting, auditing and

book-keeping services

(862)

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Exercise 2:

A Member wishes to indicate an offer or commitment in thesub-sector of “Architectural Design Services”. How it shouldmention this sub-sector in its Schedule of Commitments?

In the Secretariat list, this service would fall under the generalheading “Business Services" under “Architectural Services"(see item l.A.d). By consulting the UN Provisional CPC,Architectural Design Services can be found under thecorresponding CPC classification number 86712.

In its offer/schedule, the Member should enter the sub-sectorunder the “Business Services/Professional Services" sectionof its schedule as: Architectural Design Services (86712)

Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

Sector or subsector Limitations on market access Limitations on national treatment Additional

commitments

I. HORIZONTAL COMMITMENTS

SECTORS

INCLUDED IN THIS

SCHEDULE

II. SECTOR-SPECIFIC COMMITMENTS

[Insert specific commitments in the relevant service sector(s)/sub-sector(s) as appropriate]

01. Business Services

01.A. Professional Services

b) Accounting, auditing and

book-keeping services

(862)

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d) Architectural Services

- Architectural Design

Services (86712)

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LIMITATIONS ON MARKET ACCESS (MA): Article XVI

Giving access to home market by a member countryto services and service suppliers of other Membercountries

The provisions of GATS, laid down in Article XVI.2,cover six types of restrictions that must not bemaintained in the absence of limitations1. Limitations on the number of service suppliers;

2. On the total value of service transactions or assets;

3. Number of operations or quantity of output;

4. Number of natural persons supplying a service;

5. Type of legal entity or joint venture through which a service is provided;

6. Any foreign capital limitations relating to maximumlevels of foreign participation

The first four restrictions are quantitative as they deal

with quota-type limits

May be expressed either as an absolute number or in

the form of an Economic Needs Tests (ENTs)

For ENTs, members should specify the approval criteria

that are being applied to such tests

These measures, except for (5) and (6), are not

necessarily discriminatory, i.e., they may affect

national as well as foreign services or service

suppliers

Article XVI.2 limitations Examples

a) Number of service suppliers

(i.e. numerical quotas, monopolies, exclusive

service suppliers or an economics needs test)

Annually established quotas for foreign medical

practitioners.

Licence for a new restaurant based on an economic

needs test.

Nationality requirements for suppliers of services

(equivalent to zero quota for foreigners).

b) Value of service transactions or assets

(i.e. numerical quotas or economics needs test)

Foreign bank subsidiaries limited to x percent of total

domestic assets of all banks.

c) Number of service operations or quantity of

service output

(i.e. designated numerical units in the form of

quotas or economics needs test)

Restrictions on broadcasting time available for foreign

films.

d) Number of natural persons employed

(i.e. numerical quotas or economic needs test)

Foreign labour should not exceed x per cent and/or

wages y per cent of total.

e) Type of legal entity or joint venture Commercial presence excludes representative offices.

Foreign companies required to establish subsidiaries.

In sector x, commercial presence must take the form of

a partnership.

f) Participation of foreign capital

(i.e. maximum percentage limit on foreign share-

holding or the total value of individual or

aggregate foreign investment)

Foreign equity ceiling of x per cent for a particular form

of commercial presence.

WHAT NEED NOT BE ENTERED INTO THE MARKET

ACCESS COLUMN?

Many factors can potentially affect “market access”, butonly restrictions that fall under the six categories listed inArticle XVI.2 are subject to scheduling

Approval procedures or licensing and qualificationrequirements, such as financial soundness or membershipin a professional organization, are frequently stipulated asconditions to obtain a licence, they do not need to bescheduled under market access

Quantitative restrictions specified in first four conditionsrefer to maximum limitations Minimum requirements, such as, minimum capital

requirements for the establishment of a corporate entity do notfall within the scope of Article XVI

LIMITATIONS ON NATIONAL TREATMENT (NT): ARTICLE

XVII

The national treatment standard does not require formally

identical treatment of domestic and foreign suppliers

Formally different measures can result in effective equality of

treatment; conversely, formally identical measures can in

some cases result in less favourable treatment of foreign

suppliers (de facto discrimination)

That limitations on national treatment cover cases of both

de facto and de jure discrimination

Unlike Article XVI, Article XVII does not contain an

exhaustive listing of the types of measure which would

constitute limitations on national treatment

The NT obligation in Article XVII does not require aMember to extend such treatment to a service supplierlocated in the territory of another Member

Any subsidy which is a discriminatory measure withinthe meaning of Article XVII would have to be eitherscheduled as a limitation on NT or brought intoconformity with that Article

Restrictions on the purchase, lease or use of realestate, connected with the supply of a service inscribedin a schedule, are NT limitations to the extent thatdifferent conditions apply to foreign services supplierswhich alter the conditions of competition in favour ofservice suppliers of the Member compared to likeservice suppliers of any other Member

Exercise 3:

Domestic suppliers of audiovisual services should be

given preference in the allocation of frequencies for

transmission within the national territory. Should this be

included as an NT Limitation? Why or why not?

Yes. Such a measure discriminates explicitly on the

basis of the origin of the service supplier and thus

constitutes formal or de jure denial of national

treatment.

Exercise 4:

A measure stipulates that prior residency is required for

the issuing of a licence to all service suppliers. Should

this be included as an NT Limitation? Why or why not?

Yes. Although the measure does not formally distinguish

service suppliers on the basis of national origin, it de

facto offers less favourable treatment to foreign service

suppliers because they are less likely to be able to meet

a prior residency requirement than like service suppliers

of national origin.

ADDITIONAL COMMITMENTS

Commitments with respect to measures affecting trade in

services not subject to scheduling under Articles XVI and

XVII

Are expressed in the form of undertakings, not limitations

Can include, but not limited to, undertakings with respect to

qualifications, technical standards, licensing requirements or

procedures, and other domestic regulations that are

consistent with Article VI

Are optional

EXCEPTIONS (ARTICLE XIV ) AND SCHEDULING

All measures falling under Article XIV (GeneralExceptions) excepted from all obligations andcommitments, should not be scheduled

Cannot be negotiated under Specific Commitments

Any prudential measure taken in accordance withparagraph 2(a) of the Annex on Financial Servicesconstitutes an exception to the Agreement, should notbe scheduled

Measures falling under Article XII (Restrictions toSafeguard the Balance of Payments) also exceptions,should not be scheduled

SPECIFIC COMMITMENTS AND MFN EXEMPTIONS

The MFN obligation requires that the most favourable treatmentactually accorded in all sectors, whether the subject of acommitment or not, must also be accorded to all other Members

A Member taking a national treatment or a market accesscommitment in a sector must accord the stated minimum standardof treatment specified in its schedule to all other Members

Where an MFN exemption has been granted for a measure, aMember is free to deviate from its Article II obligations, but notfrom its Article XVI and Article XVII commitments

In such cases, a Member may accord treatment in that sectormore favourable than the minimum standard to some Members,as long as all other Members receive at least that minimumstandard of market access and national treatment appearing in itsschedule

HOW TO TREAT THE MODES OF SUPPLY? Four modes of supplying services under the GATS

Whatever the mode of supply, obligations and commitmentsunder the Agreement relate directly to the treatment of servicesand service suppliers

They only relate to service consumers insofar as services orservice suppliers of other Members are affected It should be noted that a Member may only be able to impose

restrictive measures affecting its own consumers, not those of otherMembers, on activities taking place outside its jurisdiction

Limitations in the schedule of a Member - if any - with respect tomode 2 on market access and/or on national treatment shouldonly relate to measures affecting the consumers of that Member,and not to measures affecting consumers of another Member, inthe territory of that Member

In Mode 4, many participants have chosen to inscribetheir commitments in the form of undertakings ratherthan in the form of market access limitations In such cases the bound measures affecting the entry

and temporary stay of natural persons should beexplicitly stated

In the absence of a reference to a specific duration forthe temporary stay of a foreign service supplier, it couldbe understood that no binding is being undertaken inrespect of the duration of that stay

Where a service transaction requires in practicalterms the use of more than one mode of supply,coverage of the transaction is only ensured whenthere are commitments in each relevant mode ofsupply

Exercise 5:

A Member has made full commitment in the

cross-border supply of architectural services (e.g. by

telecommunications or by mail). Would this extend to

presence of foreign architects to provide their services

on a temporary basis?

No. This commitment alone does not extend to the

presence of foreign architects as its comes under Mode

4. A separate commitment would have to be taken

under "Presence of natural persons (Mode 4)" to cover

this case.

HOW TO RECORD COMMITMENTS?

Three important things to consider while recording thecommitments-

1. Horizontal commitments

2. Sector-specific commitments

3. Levels of commitment

Some commitments may apply to trade in services in allscheduled services sectors unless otherwise specified

In order to avoid repetition, it is desirable to enter suchcommitments in a separate section at the beginning of theschedule according to the four modes of supply

Such a section could be entitled: "Horizontal commitmentsapplicable to sectors listed in the sectoral part of the schedule”

Horizontal commitments condition all other entries in theschedule unless otherwise specified

For a sector-specific restriction, the entry must be readas the combination of the horizontal restrictions and ofthe sector-specific restriction unless explicitly providedotherwise in the entry A "none" in the sectoral section must be read as meaning

"none except the conditions set out in the horizontalsection”

To indicate in a given sector that no restrictionswhatever are imposed, a Member must make clear inthe horizontal section or in the relevant sectoral sectionthat the horizontal restrictions do not apply in the sectorin question

SECTOR SPECIFIC COMMITMENTS

A sector-specific commitment applies to trade in services ina particular sector

A measure, maintained as contrary to MA or NT, must beentered as a limitation in the appropriate column (eithermarket access or national treatment) for the relevant sectorand modes of supply The entry should describe the measure concisely, indicating the

elements which make it inconsistent with MA or NT

Given the legal nature of a schedule, it should contain onlydescriptions of bound commitments Any additional information for transparency purposes should not

be entered in the schedule A reference to the legal basis of a scheduled measure (i.e. the

relevant law or regulation) may be entered if thought necessary

LEVELS OF COMMITMENT

Depending on the extent to which a Member has limited marketaccess and national treatment for each commitment, four casescan be foreseen:

1. Full Commitment

No limitation on market access or national treatment in agiven sector and mode of supply through measuresinconsistent with MA or NT The Member should mark in the appropriate column: NONE Relevant limitations listed in the horizontal section of the schedule still

applies

Regardless of entry in the MA column, “None" entry in theNT column mean that NT is bound for entire mode and notlimited to what bounded in MA commitment with limitations If a Member makes an MA commitment, where commercial presence

is limited to partnerships, an entry "None" or any other entry in the NTcolumn would refer to the whole mode of supply and not only topartnerships

2. Commitment with Limitations

Two possibilitiesI. Binding of an existing situation ("standstill")II. Binding of a more liberal situation where some, but not all, of

the measures inconsistent with MA or NT will be removed("rollback")

In either case, the Member must describe in the appropriatecolumn the measures maintained and inconsistent with MAor NT

The entry should describe each measure concisely,indicating the elements which make it inconsistent with MAor NT It would not be correct merely to enter in a column words such

as "bound", "freeze" or "standstill”

In some cases a Member may choose to partially bindmeasures affecting a given category of suppliers. "Unboundexcept for measures affecting.....”

3. No Commitment

Member remains free in a given sector and mode of

supply to introduce or maintain measures inconsistent

with MA or NT

Member must record in the appropriate column:

UNBOUND

This case is only relevant where a commitment has

been made in a sector with respect to at least one mode

of supply

Where all modes of supply are "unbound", and no

additional commitments have been undertaken in the

sector, the sector should not appear on the schedule

4. No Commitment Technically Feasible

In some situations, a particular mode of supply may not betechnically feasible, example, cross-border supply ofhair-dressing services

In these cases the term UNBOUND* should be used

The asterisk should refer to a footnote which states "Unbounddue to lack of technical feasibility”

The term may not be used as an entry in the NT column formodes 1 and 2 when, for the same service, there is an MAcommitment

Where the mode of supply thought to be inapplicable is infact applicable, or becomes so in the future, the entrymeans "unbound”

KEY POINTERS FOR SCHEDULING COMMITMENTS

By virtue of Article XX, every signatory must attach to theGATS its national schedule

Submitting scheduling document is a compulsion andnot a choice

Schedules, including footnotes, headnotes andattachments, are a record of legal commitments

Nothing should appear in them which a Member doesnot intend to be legally binding

Market access and national treatment commitments applyonly to the sectors or sub-sectors inscribed in the schedule

Not a right for the supplier of a committed service tosupply uncommitted services which are inputs to thecommitted service

For MA scheduling purposes, the entries should be

confined to measures that fall under one or more of the

six categories of limitations listed in Article XVI.2

For NT, the benchmark is not whether there has been

formally identical or different treatment of domestic and

foreign services and service suppliers, but if conditions

of competition have been modified as a result of the

measure

Commitments guarantee minimum levels of treatment,

but do not prevent Members from being more open (or

less discriminatory) in practice

Thanks

pralok@iift.ac.in